HRO Reduces TCO!

Buyers, how much will you save by implementing HRO services? Will it be 8% or over 50%?

ADP recently published the results of its latest total cost of ownership (TCO) study, The Hidden Benefits of Human Resources Business Process Outsourcing. The company has sponsored several PwC TCO studies since 2003 comparing the TCO of companies maintaining HR services in-house to those using ADP HR BPO. The 2012 study was completed by Sourcing Analytics and digs even deeper into the patterns established in the earlier PwC studies.

I touched on this topic last year, but it is well worth a second look because the research supports common HRO advice and counsel.

The good news remains: HRO of services including payroll, time and attendance, workforce administration, and health & welfare reduce TCO over in-house services.

The bad news is that HRO is not a quick financial fix and first year savings are usually modest. It takes time and hard work to transform HR operations and service delivery, but there are companies that have reduced TCO by 50% with 20-30% being possible for most over time.

Often, one or more HR services are outsourced with the focus mostly on the technology and transactions and may include more than one service provider. While there should be many benefits in new service features and functions and improved processing, the TCO impact is likely to be low, perhaps only 8%. To get both full value and full savings, more is needed.

Here are some of the building blocks that can be used to further increase your HRO TCO:

Technology and process

  • Use one vendor for integrated payroll and time and attendance to bump up savings a bit
  • Move to SaaS-based technology platforms to reduce technology costs the most
  • Make it real BPO, include contact center services
  • Multi-process HRO (MPHRO) saves more than best-of-breed services managed in-house, can significantly ramp up savings.

Process and people

  • Support initial transition, adoption, and utilization
  • Adopt standardized and centralized best practice processes across the entire enterprise
  • Follow through and reduce or re-deploy the retained organization
  • Keep working on it together; it may take up to five years to achieve maximum TCO savings as maturity is attained and more and more of the building blocks are added.

How much a particular client will save depends on a number of choices and options that are largely within the control of the client. In addition to great HRO performance, top-notch providers will be able to support each client in their journey to attain the most savings possible.

Next week, we will take a look at some of the factors and actions that shape the HRO journey.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

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Explore posts in the same categories: Customer Service, HR BPO, hr outsourcing, hr outsourcing research, hro, hro research, HRO Service Provider, multi-process hro, nelsonhall, payroll outsourcing, SaaS, TCO

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